Correlation Between CITY OFFICE and Retail Estates

Can any of the company-specific risk be diversified away by investing in both CITY OFFICE and Retail Estates at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CITY OFFICE and Retail Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CITY OFFICE REIT and Retail Estates NV, you can compare the effects of market volatilities on CITY OFFICE and Retail Estates and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CITY OFFICE with a short position of Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Retail Estates.

Diversification Opportunities for CITY OFFICE and Retail Estates

0.51

Correlation Coefficient

CITY OFFICE  Retail Estates

Very weak diversification

The 3 months correlation between CITY and Retail is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV and CITY OFFICE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CITY OFFICE REIT are associated (or correlated) with Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Retail Estates go up and down completely randomly.

Pair Corralation between CITY OFFICE and Retail Estates

Assuming the 90 days horizon CITY OFFICE is expected to generate 1.86 times less return on investment than Retail Estates. In addition to that, CITY OFFICE is 2.57 times more volatile than Retail Estates NV. It trades about 0.01 of its total potential returns per unit of risk. Retail Estates NV is currently generating about 0.03 per unit of volatility. If you would invest  5,022  in Retail Estates NV on August 31, 2024 and sell it today you would earn a total of  868.00  from holding Retail Estates NV or generate 17.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CITY OFFICE REIT  vs.  Retail Estates NV

CITY OFFICE REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE reported solid returns over the last few months and may actually be approaching a breakup point.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CITY OFFICE and Retail Estates

The main advantage of trading using opposite CITY OFFICE and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE position performs unexpectedly, Retail Estates can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Retail Estates will offset losses from the drop in Retail Estates' long position.

The idea behind CITY OFFICE REIT and Retail Estates NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.